Is Rishi Sunak really threatening a windfall tax on oil and gas?

The chancellor did a J-turn on Wednesday – a half U-turn – when he said that a windfall tax on the oil and gas companies was “something I would look at”. Until then, Rishi Sunak had criticised the Labour Party’s proposal, saying that it would deter the companies from investing, including in green energy.

He told Mumsnet that “if we don’t see that type of investment coming forward” he would look at the idea, adding that “nothing is ever off the table in these things”.

What is going on? One possibility is that he feels he should sound more sympathetic to the idea before BP and Shell announce big profits this week. It at least gives ministers a “line to take” in response to the inevitable anti-capitalist outcry. It also reminds the companies – not that their public relations departments need any reminding – that when they announce their profits, they must make a big fuss about how vast sums will be ploughed back into investment.

But I wonder if Sunak might be preparing the ground for the rest of the U-turn. After his badly received spring statement and the revelation of his wife’s non-dom tax status, he needs to get back on track, and this would be a clever way to do it.

If the opposition has a popular policy, there is no good reason not to steal it. It would reduce investment in wind and solar power, but investing in the revival of his own career and rescuing some of the unpopularity of the government may be more important to him.

In any case, the Labour Party’s argument for a one-off tax is persuasive enough. The profits from the sudden rise in oil and gas prices are indeed a windfall – they weren’t expected, and therefore the extra investment that might come from them would be a bonus, so it may be that the money would be better spent in protecting the living standards of the poor from the unexpected squeeze.

Labour would mock Sunak for finally doing what they had been advocating, but that is rarely a wounding charge in politics. It would cause Rachel Reeves, the shadow chancellor, more problems than it would create for him because she would be left with nothing with which to fund her spending plans.

Nor would Sunak expect much opposition from the tax-cutters on his own side. The purists among them may be sincere in opposing all and any tax rises, but the more populist so-called Thatcherites would be inclined to overlook it, especially if it funded a tax cut for the lower paid.

If I were BP or Shell, I would put aside some cash this week, just in case.

Yours,

John Rentoul

Chief political commentator